Correlation Between Ucloudlink and Lumen Technologies

Can any of the company-specific risk be diversified away by investing in both Ucloudlink and Lumen Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ucloudlink and Lumen Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ucloudlink Group and Lumen Technologies, you can compare the effects of market volatilities on Ucloudlink and Lumen Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ucloudlink with a short position of Lumen Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ucloudlink and Lumen Technologies.

Diversification Opportunities for Ucloudlink and Lumen Technologies

-0.67

Correlation Coefficient

Ucloudlink  Lumen Technologies

Excellent diversification

The 3 months correlation between Ucloudlink and Lumen is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ucloudlink Group and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies and Ucloudlink is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ucloudlink Group are associated (or correlated) with Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Ucloudlink i.e., Ucloudlink and Lumen Technologies go up and down completely randomly.

Pair Corralation between Ucloudlink and Lumen Technologies

Considering the 90-day investment horizon Ucloudlink Group is expected to under-perform the Lumen Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Ucloudlink Group is 2.99 times less risky than Lumen Technologies. The stock trades about -0.04 of its potential returns per unit of risk. The Lumen Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  130.00  in Lumen Technologies on August 18, 2024 and sell it today you would earn a total of  724.00  from holding Lumen Technologies or generate 556.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ucloudlink Group  vs.  Lumen Technologies

Ucloudlink Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ucloudlink Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lumen Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumen Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Lumen Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ucloudlink and Lumen Technologies

The main advantage of trading using opposite Ucloudlink and Lumen Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ucloudlink position performs unexpectedly, Lumen Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lumen Technologies will offset losses from the drop in Lumen Technologies' long position.

The idea behind Ucloudlink Group and Lumen Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.